There are many reasons why people are encouraged to invest in commodity derivatives than any other available derivatives. The benefits and advantages are not only for the investors but also exporter or importer, producer or large scale consumer. To provide you with more information, read below.

Benefits to investors:
• Less manipulation
Since this is governed by price movements in the international market, commodity markets are not prone to price manipulation or rigging.
• Diversification
Prices of commodity are prone to weather conditions, supply and demand dynamics, natural disasters and political tensions. Commodities are independent classes and it proves to be a highly effective mean of diversification in an investor’s investment portfolio.
Benefits to exporters and importers
• Protection against eminent price changes
Importers and exporters are highly impacted by the movements of commodity prices in the market. These changes impact their business both in positive and negative way. Moving on, commodity derivatives trading helps importers and exporters to hedge any price changes that may occur subsequently, as prices of commodities are already decided months before the actual delivery date. Any changes in the price of commodities in the market will not affect the prices of the commodities on the contract.

Benefits to producers
• Price of commodities are locked in
For farmers, one of the challenges they face is the drastic change in prices of their products in the market at the time of their harvest. Good if the prices increase but if it decreases, it gives them huge loss. The contract will assure them that their products will be traded in the market as agreed way before the harvest time. Any changes in the prices will not affect their products as they already had an agreement and locked a specific price.
• Guaranteed demand
There is no guarantee that products are in demand at time of harvest. Hence waiting for the right buyer may take time. This contract will assure producers that their products will be claimed and paid in full after harvest, at a price and time agreed. With this, producers will not need to wait as their products are considered sold even before harvest.
• For large scale consumers
For industrialists, prices of their commodities or products are based on their raw materials price. If there is a sudden change of prices in the market, they have no choice but to pass on the burden to the consumers. Any changes in the prices of products, especially if the increase is drastic, would give a negative implication not just to the product per se but the company. The contract will help industrialists in fixing the cost of the raw materials even if change of their prices occur in the market.
• Continuous supply
Commodity trading ensures continuous supply of raw materials even if supplies in the market fell short. The contract will guarantee industrialists that supplies will be given at a specific time and determined price even quantity of which are decreased in the market. Production of the products will continue as they are guaranteed of supplies.